Why I don’t really care
Now, this may still end up being a more serious situation for stocks and my net worth could go much lower.
Thankfully, I feel fine. I’m even slightly hopeful that prices will continue falling until I can buy again in January. After all, I’m going to be buying stocks for at least the next 28 years: why would I want them to be expensive?
Paper losses aren’t real until you sell the assets in question. My very simple philosophy is to never sell and buy things that look cheap/good/interesting. It’s not an optimal strategy, but I think it should do me okay.
Of course, if I was going to be needing the money in the next five years or so, I might be worried at this point.
That would be a sign that my portfolio was out of whack. The closer you are to needing the money, the more conservative/defensive your investments should be. That’s the point of the ‘your age in bonds’ rule of thumb.
How are your investments going? Are you hoping for higher or lower markets?
I turned 55 last year, and my financial adviser started out meeting with “Well, you’re in a new phase of retirement planning now. Your goal is not wealth creation but rather asset protection. You don’t have enough time before retirement to weather another downturn in the market.” Wow, powerful words. In essence, he was saying “You’re too old now to be investing as you did before.”
I really appreciated your comment that you will be investing for 28 more years. Oh, how I wish I’d started investing seriously when I was a lot younger. In my TEFL teacher training course now, I always include a module on saving for the future. My students are all of 20 or 21 or maybe 22… how I wish someone had given me this advice clearly and succinctly and concretely way back when ….
Thanks for this blog. I really enjoy reading it.
KF
Hi Keith
Thank you so much for the comment and the kind words. It’s nice to know I have one reader 🙂
I know what you mean about starting early -if I’d started saving and investing when I started working as opposed to eight years later, I would be semi-retired now! Warren Buffet started when he was eleven…
Still, I always look at this as being a case of the best time to start was yesterday, but the second best time is today.
Glad you’re enjoying the blog. Let me know if there is anything you’d like to read about.
Keith,
It’s great that you’re including a module on saving in your training course. It’s amazing how many people make it to their twenties without ever having even been exposed to the idea of compound interest. I was lucky in that it was one of my dad’s favorite things to talk with me about over eggs and coffee on a Sunday morning.
Ben,
I too wish I had started investing when I started JET ten years ago. Although at the time I thought it might be the only three years I would send in Japan and certainly would have regretted not having spent the money on travel and new experiences.
Hi Rob
I know what you mean. I find it’s much easier to strike that balance between spending now and spending later now that I know what I value. I don’t buy much stuff anymore, but if anything spend much more on food and travel 🙂
Hi Ben,
It’s been a while! Thanks for continuing to post interesting articles despite the small readership.
I personally don’t think this is the start of the crash, just a much-needed correction. Could be wrong though. I think if there is a crash it might not be until late 2015 (based on various things I have read; maybe when the US starts raising interest rates?). I might move some money from stocks to bonds before then, just in case.
As for now, my permanent portfolio is fine because gold is rising, which is absorbing the stock losses. Bonds are rising too. My stock/bond portfolios are down a little but it’s not too bad.
Do I want to see higher or lower prices in the future? Good question! I suppose I don’t really care. If there is a crash it would be nice to buy more stocks at a lower price, but apart from that I don’t mind either way. My stock/bond portfolios are being drip-fed every month anyway, so the powerful principle of cost averaging is making sure I’m buying more of the cheap stuff than the expensive stuff.
Hi northSaver
Great to hear from you! I love my readership, so no worries there 🙂
I just read Tim Hale’s Smarter Investing, so I’m thinking about diversification again.
Seems like the stock market has largely recovered now anyway. False alarm! (but I’d still like to see much lower prices for the next 3-5 years).
I put 3% of my Florida paycheck into retirement/pension every 2 weeks. It’s required by Florida. I also max out the amount that gives me the max tax benefit.
I, too, am a huge believer in dollar-cost averaging. I also have some “mad money” that I invest in Home Depot or Apple. When they drop a few dollars, I buy. When they rise, I sell. Sometimes it takes a week, sometimes a month. This last drop made me nervous, so I bought and prices started to come up but then got frosty again, so I sold. Again, this is not my pension money; it’s some money on the side that I have just for this purpose. Little by little, I am making money. (But I’d probably be better just putting the money in a fund and walking away….)
Thank you for this opportunity to have this conversation.
You asked what I’d like to hear more about: BONDS. I’m 56 and I read the other day that one safety rule of thumb is that you should have your age invested in bonds. If so, then my portfolio would be 56% in bonds, and mine is nowhere near that. Any thoughts?
Thanks everyone,
Keith
Hi Keith
That’s a great topic. I’ll try and put some thoughts together over the next few days.
Thanks!
I also have some play money, although I haven’t really done very well with it (bought gold and Russia ETFs on the dips, and they haven’t really done much since) so am considering giving up the hope that I am the next Buffett 🙂
Hi RetireJapan,
I’m also a reader here, and am interested in the topics you discuss and the blog and website overall. Thanks for setting it up. Thanks also for putting me on to the MMM website also. My husband is getting told all about the Mustachian way of life – maybe a little more than he wants to know!
I’d like to read more about the NISA. From talking to a few people it seems that everyone is simply too worried about the sales tax hike to be thinking that type of long-term saving.
This was a good resource in English on the topic.
http://www.jsda.or.jp/en/newsroom/others/files/NISA.pdf
On the topic of stocks, did you see this story about a mystery day-trader in Tokyo who goes by the name of CIS. A great Japan story:
http://www.bloomberg.com/news/2014-09-25/mystery-man-moving-japan-made-more-than-1-million-trades.html
Hi Chibalass
Thanks for commenting! Have you seen our page on the NISA? You can find it in the menu above. There are a couple of important changes on the way that are quite exciting…
Also, I think the J401k has much more potential for long-term investors, at least until the NISA duration is extended.
I did see the ‘manic trader’ article but I can’t say it’s a lifestyle that appeals to me 😉
Back on October 16, you wrote about your first experience with the then current stock market correction and how you’d lost money. I am assuming that you’ve more than made that money back now, right?
I saw the big correction (reported as a “recession” here) in the Nikkei within the past week.
So did the October situation with your stocks blow over?
Keith
Hi Keith
Yes, my assets spreadsheet is higher than ever now. The stock market seems to be hell-bent on proving that it trends upwards taking an erratic path up and down.
The thing is, I have no more ‘made money’ now than I had ‘lost’ it before… I have the same number of stocks and until I sell them their price is just an abstraction. I think that is the best way to think about things in order to avoid driving yourself crazy 🙂
Thanks for getting back with me. Yes, that was my point exactly. The losses you talked about back in early October would have been losses only if you’d actually sold the stocks at that point, and the same applies now about gains.
If not in stocks, where else could someone put their money these days? Here in the US, I hear people say the market makes them nervous, but there really aren’t tons of other investment options.
Keith
Hi Keith
I don’t think it makes sense to talk about the market ‘these days’. Doing so would imply some kind of knowledge about where it is going to go in the short-term, which no-one has.
The best thing is to have a deliberate portfolio and strategy, and stick to it. This is going to depend on all sorts of factors, including your assets, your human capital, your attitude, etc.
I just read an interesting article about an ‘all-weather portfolio’ that you might find interesting. I also owe you a post about bonds! October/November this year have been manic, so I have a lot to catch up on in December, including that post.
Here’s the article: http://awealthofcommonsense.com/back-testing-tony-robbins-weather-portfolio/
(I am sending this email so I can be notified of updates again. I accidentally hit the unsub button)